Debunking The 'But People Just Want Stuff For Free' Myth

from the debunking-the-myths dept

One of the popular myths we always hear about content-based business models these days is that "but people just want stuff for free." This has been debunked so many times, it's silly, but it's worth debunking again. One of the easiest ways to debunk it is to show examples of people being more than happy to pay, even if the content at the core of what they're paying for is available for free. We saw this, a few years back, when Trent Reznor sold out of his $300 "Ultra-Deluxe Limited Edition Package" of the Ghosts I-IV album, even though all of the tracks were available as a free download under a Creative Common license. To some extent, we saw this ourselves, when we offered our own CwF+RtB packages, and the more expensive packages outsold the cheaper ones.

You see, in trying everything--audiobooks, POD, limited editions--I've discovered the thing that captures the public's interest is also the thing that makes the most money is also the thing that has the least logistics: super-premium limited editions. Over and over again, when I describe With a Little Help to people, they fixate on the limited editions. I've had dozens of e-mails from people practically begging to buy the $275 editions I'm doing--and I stand to make $50,000 or more from them.

So that's my next project, I've decided, after With a Little Help is done and I'm back on my feet: limited editions, 100 copies each, of all my previous novels, each one elaborate, personal, beautiful, and amazing. It helps that my new office is underneath the London Hackspace, a co-op through which I have 24/7 access to a 3D printer and a laser cutter/etcher.

For my novel Someone Comes to Town, Someone Leaves a Town (a fantasy that features a trio of brothers who nest like Russian dolls), I'm thinking I will do a full-size edition, bind it, then laser cut a 66% rectangle out of the middle of the pages; print and bind a 2/3 size miniature, slip it into the void; and then cut another void out of it, nestling a tiny quarter-sized hardcover in the middle. I'll charge whatever it costs me to print plus $150, and print and bind them on demand, in tens, and sell as many as I can up to 100. I also figure I'll hold back five copies from each limited, and in a decade or so, I can have custom wooden boxes made for five sets, and auction them off for whatever the market will bear.

But people just want stuff for free, right? Especially the folks who follow the likes of Cory Doctorow... Except, of course, that's simply not true.

You call it debunked, but it still isn't. point to the 1 in 100 or 1 in 1000 who is willing to overpay doesn't explain away the other 99 (or 999) who didn't want to pay a cent, but still enjoyed the product anyway.

it is like running a starbucks, where 99 people get free lattes, and the 100th has to pay $500 for it. It works as long as you have idiots willing to pay $500 for a latte. Perhaps they make it exclusive and rare by writing his name in marker on the site of the cup or something.

If people didn't want it for free, why all the piracy? It is easier to buy it at the store, or order it online. There is little risk of downloading a crap file, or a virus, or getting in legal trouble, you know the stores will have what you want and you will get everything that comes with it.

Nope. They want it now. They want it free.

You can only debunk that by ignoring the masses and focusing on a very, very narrow group of people. That is called a "fail".

Re: Free sodomy!

If I could afford a $500 super-limited edition of a Cory Doctorow book (Little Brother, to be specific) I'd jump upon it. Sadly, I'm broke. Betwixt being sodomized via taxes and generally low pay combined with high cost of living--I pretty much have no disposable income. (Only posable income...)

If I'd never read the free electronic version of, well every book Cory Doctorow has ever written, I would not be a fan. Likely I wouldn't have read them. In which case, I would not care about a limited edition anything.

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_sigh_ Ok, I apologize for that one.
I only allow myself a little ad hominem on the 'anonymous coward' thing. It's funner* that way, and largely harmless as I won't use it as part of a fallacious argument.

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1. Can I make money, possibly more money, if I give my core product away and instead charge for true "rare" items.

2. Given a choice, will more people choose to be cheapskates or generous?

#1 has been proven - and you can indeed make money, maybe more money, by giving your songs, software, writing, xyz, away.

#2 ???... I don't know. I'm a big cheap-skate. I will always take Hulu over cable. And I will take Hulu basic over Hulu Plus. And when I can't get the content I want for free on Hulu I'll look elsewhere. No matter how sweet the deal, I'm not paying for access to TV shows.

There are plenty of generous people. And there are plenty of fanatics. And combined means there is plenty of money to be made.

But when people are given the choice, the statement "People just want free stuff", I suspect, is generally true.

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No, people will accept free stuff, they will pay for stuff they want on the basis of what they can afford. I read previews and e copies of my favorite authors. I also own all there books, some in hard copy to support them. If you have limited resources of course you will not want to pay for anything other than what you know you will want. If you cannot or do not want to pay you will still talk up the products you like so people who can and will pay will learn about the product. This is advertising and is in fact worth something as payment. Darkhelmet writes stories, at this point name recognition is in fact worth more than someone paying 20 dollars for a story. The only reason this seems odd is that "it is not how things are done". 20 years from now we will all be wondering what took so long.

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Re: Addtional Free Sodomy

Oh yeah, and the marginal cost of distributing an electronic book is MUCH LESS than the cost of a cup of coffee.

Logic: Not just for smart people!

To rectify your example: My coffee plus cups costs me a total of $0.0005 per cup of coffee given away. (Every 200000 cups of coffee given away costs me $1). I decide to put up a little cup that says 'tips' written on it in permanent marker. Occasionally, somebody puts a nickel in there. If one person in 40000 puts a nickel in there, I break even. In reality, it's closer to one in every 50 people puts a quarter in there, so I make a massive profit.

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Why people continue to compare digital media to actual physical products is beyond me. Lets say it costs $5,000 to record a cd and post it to iTunes. If you aren't buying cd's to actually burn, and paper to print your little booklet, and a plastic case to hold it, and shipping to get your cd all over the world etc, why is your cd still worth $25? It isn't, maybe people recognize how your not spending any money putting your music on iTunes and claiming it costs you so much money to put there. Maybe if you admit, that little fac,t and sell your cd for $8 instead of $25 people will stop think you raping them and pay for your music.

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As always, if you only want to look at marginal costs, and ignore all the other implications, you are correct. Even then, your marginal costs in the coffee example are much larger, sorry. You also forgot to include the cost of your time as a marginal cost (hourly rate / number of possible pours) = marginal labor costs. You have a limited and not unlimited amount of time to work.

A discussion of marginal costs does nothing to contribute to the "debunking of the myth" that people want it for free. Most people, presented with the chance to enjoy free coffee, will do just that. Your entire business model would depend on one person "tipping" enough to make up for all of those who don't pay. If you do that every day, over time, more and more people will learn they don't have to pay, and they won't tip either.

More importantly, if you were trying to promote selling coffee, you likely failed. You have taught people that coffee is "free". Without guilting them into a tip, you would get little or nothing.

Many (including TD) cite the example of the donut / bagel guy who used "honor payments" for his business. It is a workable model because he had enough contact with people, and would use guilt to keep people paying.

When things move online, it gets even easier for the freeloaders, because there is no group guilt involved. Nobody is checking. Nobody will say anything. You can tell everyone you paid $200 for something, when you took it for nothing. Nobody can tell. As people have realized this, they have become more and more greedy, more and more willing to take for free (because nobody is checking), and more and more adverse to any system that actually makes them pay (even with their attention).

There is one other mistake in looking only at marginal costs and not considering the other implications. As we move into a work with more and more e-readers, and people become more comfortable with them, the electronic "upsell to printed book" argument tends to disappear. If I enjoy reading on an e-reader, the pirated version is just as good as the pay version. So if you give the pay versions away for a tip (and those people then pirate them, because, hey, they were free, and they can), you end up with a market being ruined by people no longer considering that they should have to pay to read the book. All that "free" stuff basically guts the market out.

TD refers to it as "infinite distribution", the rest of us just call it "flooding the marketplace".

At that point, the writer becomes dependent on the small group of people still collecting printed books (Captain Jean-Luc Picard, example). Otherwise, his work may have value, but it no longer has a market price.

Writers sadly don't have a lot of other marketable skills. Further, their work actually takes a long time to do. A single book can take a year or more to write, edit, etc. Many writers don't have the time to travel week in and week out to soe how interact with fans in a way that generates income. Book signings? Why do there, if there are no book stores anymore. Remember, electronic media will render books stores as obsolete are music stores are today. So where do they make their money? Same place as everyone else, selling t-shirts or similar, because there is nothing left.

They depend entirely on people overpaying dramatically for something else, because they can no longer sell their actual work.

Sad, isn't it?

We have seen it in music. Given the chance and the tools, people will take the music for nothing. They will sneak in to the concerts for free if they can, and generally, they will sponge.

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"In the freetard world, the goal is simple: make the few- the actual talented creators, work harder, so the many- those that are untalented, can consume for free."

Ah, the "think of the artists!" argument rears it's ugly head again, mixed in with the argument that there are very few talented people in the world worthy of being published.

YouTube has proven that, despite the great numbers of completely untalented people out there with point-and-shoot video cameras/cell phones, there is a significant number of talented people out there who don't work in the industries where their talents seem to be most appropriate.

The content industries have been confusing themselves with their artists and their content for years, the way Louis XIV confused himself with the state. If the industries died tomorrow, the artists would still create. Hunter-gatherers didn't draw on cave walls because they were incentivized by stringent copyright laws.

What's worse is that your strawman argument suggesting that fans have no problem with their favorite artists starving glosses over the fact that the same supposed advocates for the artists, i.e. the business majors and lawyers, are the ones who want the artists to work for nothing. They've been screwing artists over for years while at the same time using them as poster children for harsher IP laws.

The content companies are the true pirates. They steal from the public domain. They've been violating the principle of the free market for decades. They hijack the democratic process with their lobbyists. They sue old people and catholic school girls and single mothers.

But poor people who are losing their mortgages should waste money on "content" while making some suit even more rich and the artist gets a few of the leftovers once he's sold enough albums to payback his advance.

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tl;dr

Just kidding!

Anyway, a real artist, a real writer, someone with natural talent, even a garden-variety editor, would know that the goddamn novella you just subjected us to is a perfect example that there are those that are able to try, and those that are able to succeed.

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Ha! I didn't know I was writing for the critics. If it were my intention to please them, I wouldn't have said a thing for fear of getting it wrong.

A "real writer" doesn't give a damn what the critics think.

Also, if you think you can judge my entire writing ability on a single post, then you're certainly entitled to your opinion. Other people might think you're damn fool for it though, not that you should care.

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"You didn't answer the main point. Given the chance between paying for a book and getting a free copy, what do you think most people will do, given no peer pressure and no guilting?

Answer: They will take the free one."

Of course they will.

Now, answer this question: how many of those people taking the free one would have paid money if the free copy wasn't available? Those are the only people who represent "lost sales" through piracy, and I guarantee it's a much smaller number than most people assume.

You also have to balance those against people who download the free copy, then buy a copy when they realise they enjoy it (i.e. pretty much all of Cory Doctorow's paying fanbase). NOT offering a free copy would lose those customers...

The trick is to turn the "freeloaders" into paying customers, and you don't get that by trying to force them to buy a product. Public libraries are probably evil in your eyes as well, right?

"Now, care to address that, or are you too busy counting out 1000 coffee cups?"

No because people here realise that selling virtual goods doesn't require inventory and physical supplies. They're only trying to sell the items it's possible to profit from in the modern marketplace, and leveraging other items for their promotional value.

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Interestingly, I've never seen anyone suggest the latter. Meanwhile, the former assumption seems to form the bedrock of the "data" that pro-copyright organisations use to try and prove "losses" through "piracy"...

Is money being lost through "piracy"? Probably. Is it anywhere as high as industry claims? Unlikely. Is it mostly recoverable by more intelligent business decisions rather than trying to block, ban and restrict users? Absolutely.

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Indeed, you GUESS, and even your guess has a 30% margin of error. I notice you don't even mention what data you're basing this guess on.

Sorry, that's not good enough.

"If such a thing existed that could work for everyone, we would have seen it by now."

It does exist, they're just not willing to implement it because it means losing control and completely turning over their business model (e.g. losing things like regional restrictions and exclusivity deals).

"This is going to be managed at the ISP level."

Which is unworkable, will never be 100% successful, places ISPs in an impossible decisions and is guaranteed to have a wide range of very dangerous collateral damage and unintended consequences. Again, not good enough, sorry.

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"Nonsense. Easily workable,"

Thanks for the in depth analysis of why I was wrong.

There's a long history of mistakes made on this issue, with people being sued for infringement they could not possibly have committed, as well as mistakes made by ISPs when identifying users via IP addresses. How, exactly, would automating this process improve things?

"Strawman. 100% has never, and will never be expected."

Which is kind of my problem. If it doesn't work 100%, it will not stop "piracy" and will negatively affect a lot of people who are falsely accused or misidentified. No strawman here, just very real concerns about the limitations of a working system, especially one based on the assumption of guilt, as this proposal seems to be.

"FUD? snore."

Really? Tell me how, exactly, forcing ISPs to become de facto censors would not have a chilling effect on free speech, how mistakes would not negatively affect those innocently accused and how new business models would not be restricted if there's any question of their products being potentially used for infringement.

I'm yet to hear any reasonable explanation from your side of the fence, just mocking and avoiding the question, as you have ably demonstrated.

"Again, I'm surprised you would underestimate the power of technology."

I understand very well the power - and more importantly, the limitations of technology. I also understand how political and corporate concerns often stop technology from reaching its full potential and lead to inherent flaws in a technological system. Which is exactly why I know that this path cannot be successful.

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Paul, no one in their right mind would suggest every download equals a lost sale. That has no basis in reality.

The RIAA and the MPAA most certainly do suggest that. I agree that it has no basis in reality.

Problem is, anyone that suggests every download would have never resulted in a sale is also equally delusional.

The problem is that people focus on the money they could be making on selling an infinite product if it were scarce. You might as well get into business selling (the fictional) Everlasting Gobstoppers. Then, when people realize how to make them at home and they don't need you to make them, you can go out of business too!

The truth is somewhere in between, and not likely with a result you'll want to brag about.

The bigger point is that focusing on this statement at all is pointless. It simply doesn't matter. I can't imagine how much stress is involved when you can see the market for your product melt away and I sympathize- or, I used to, but dwelling on the reasons for that melting market isn't going to keep you in business. Try competing instead.

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Erm, you have that completely backwards, I'm afraid.

It's not the lack of scarcity that's artificial, but the scarcity itself. There's no reason why a digital file should ever be scarce. By its very nature, it's an infinitely available and reproducible item.

The only scarcities are those artificially imposed - regional restrictions, limited number of sales outlets (e.g. The Beatles only available through iTunes), release dates and windows, limited number of file formats, DRM, etc.

There are 2 major problems in the modern world. One is that customer recognise that the restrictions are artificial. The second is that "pirates" offer a way to circumvent these restriction with little difficulty. The industry is so fixated on stopping the second part, they forget their own complicity in making it so desirable. Few people would be "defending" the pirates' actions so much (as the industry sycophants put it) if they were offering a product people wanted to buy.

"It's like thinking a lucky one night stand with a hot chick means you get to marry her."

Assuming you mean the "hot chick" is "piracy", Napster hit the ground running in 1999 - nearly 12 years ago. By this point, we've married her, had kids and moved on to our 3rd wife. A little late to be trying to warn us about her now isn't it?

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Except pretty much no one has ever had to pay to read a book, they could borrow it from a library, or they could borrow it from a friend.

I tend to buy books for 2 reasons, first I like to own a copy of a book I enjoyed so I know it is available for me to read it again and lend it to others, and second, I want to support the author so they'll write more books that I can enjoy.

In that 2nd case, I don't actually look at it as recompense for the book already created, but more as support and encouragement for a future creation.

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Except pretty much no one has ever had to pay to read a book, they could borrow it from a library, or they could borrow it from a friend.

If it wasn't for the specific prohibition in US copyright law against lending or renting music, by now we'd have mountains of evidence that music is exactly like books and videos in this respect...despite being able to get it much cheaper (or even free), people would still buy it to own it.

With so much media (games, books, videos, music, etc.) legally (and illegally) available for far less than full retail, it would seem there is no chance that anyone would ever purchase any of these things to own, yet all are seeing growth in sales compared to the overall economy.

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What prohibition in US copyright law are you talking about? I can get CDs, movies, even software and games at my local library. Seems if that were against the law that entire brand new wing wouldn't exist.

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This is just a sad post, AC.

The myth is quite debunked. Take a look at reality for a moment. CD sales are down but the music industry as a whole is thriving. So the money isn't coming from CD sales like it used to or even online sales, even though CDs are still being made.

Now sober up and look at the technology. Forget about the pirates for the moment and look at the electronics makers. Computers are hitting the market without CD ROMS. Flash drives are bigger and a much better way to store media ( they don't scratch ). If the technology keeps moving in the direction its moving in then people will stop buying CDs because there is nothing to play them on (think vinyl and cassettes). So the music and movie industries need to be looking at that right now.

As for books being free, ever heard of a library? They have a lot of free books in those places. All those free books available for decades and still books are sold even though "free loaders" have access to them.

Starbucks is the best example yet and you should stay away from using them as an example. It's really expensive coffee that MOST people don't have to pay for. They can get a cup of coffee for free at work or at least for 5 - 10 times less. Still Starbucks is doing well.

Do people want things for free? YES!!!! Will they pay more for premium and exclusive goods when there are free versions available? YES!!!!

Let's try to wrap this up with movies, the biggest rip of the bunch....

I've used myself for this example before and I will do it again just for you.
I saw AVATAR online for free when it came out. I watched it at least 5 more times online for FREE. It was so good that I went to the theater and paid to see it 3 more times then 2 more times in 3D. It was WORTH it. Then I heard about The Hurt Locker so I watched it online for free. I still think the producers owe me money for sitting through more than 30 minutes of that movie and no I would not pay for it or recommend it to anyone.

The point is that if the product is good, then online for free protects the consumer. We will still pay for quality but we want to make sure we are getting quality. Movies are one of those products that you don't really get to know if you are getting value for your money until AFTER you have paid for it.
Call me a free loader all you want, I feel Im an informed consumer who is tired of being raped.

Lastly, if the media companies insist on using piracy for what we do to them, I think it's only fair that we use the term rape for what they do to us.

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You also forgot to include the cost of your time as a marginal cost (hourly rate / number of possible pours) = marginal labor costs. You have a limited and not unlimited amount of time to work.

If you don't wish to continue producing content without a market for directly selling every copy of your work, then perhaps you should just stop producing content. At least five more producers who ARE willing would take your place.

All that "free" stuff basically guts the market out.

Markets come and go. How, precisely, is that a bad thing, save for the handful of entitled whiners who think the market shouldn't change based on their wishes alone? Or are you naive enough to think that people will simply stop creating once they aren't able directly sell copies? Creativity is far older than the market for copies.

We have seen it in music. Given the chance and the tools, people will take the music for nothing. They will sneak in to the concerts for free if they can, and generally, they will sponge.

Yet more music is being recorded and released today than at any other point in history. Sounds pretty damn good to me.

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Writers *write* stories. That's why we call them writers. Story tellers are the people who tell those stories. We don't expect a screenwriter to be a good actor, why should we expect that someone who may spend days agonizing over a single sentence would be any good at public performance? Hell, oratory and literature are two entirely different schools in most curricula.

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Piracy is easy, it's so easy my mother figured out how to do it without help. If 99% of people only care about getting free things, why do places like Walmart or Best Buy still sell movies, music, or games? Why are these places still in business at all? If everyone wants everything for free, who's giving these people all that money to stay in business. Simple answer, people are perfectly willing to pay for a product that's worth the money (or time, or traded goods, or what have you).

So how do you take that and make money in the new age? Simple, give people something they would be willing to pay for and, hay presto, they pay for it.

The Starbucks coffee is a perfect example, for some reason people want it and will pay for it at the inflated prices. People can make their own at home, but they don't.

Simply saying that 99 out of 100 will only pay if there is no other option is bull, the continued existence of the MPAA/RIAA is proof.

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Fail.

Record stores barely exist anymore. Best Buy, Target, Walmart, etc. carry a small fraction of what they used to. They do it as a service to those that still purchase music; a small fraction because most consumers simply rip it off on the internet now.

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"Record stores barely exist anymore."

Yes they do. Just not as massive retailers in physical space, like they used to when that was the only was to sell recorded music. The modern concept of "record store" may just have changed to mean accessing iTunes from my iPhone instead of driving down to Tower Records. That's proof that the old business model is obsolete, not that nobody buys music, nor that nobody wants to.

"Best Buy, Target, Walmart, etc. carry a small fraction of what they used to."

So, they're not working as high profile loss leaders any more, and that proves...?

"a small fraction because most consumers simply rip it off on the internet now"

Citation needed. Online music retailers appear to be doing fine, just not in the numbers needed to replace offline album sales. This can be for many reasons other than "piracy".

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Dear Bonehead,

The things people take for free are the exact things that CAN'T be bought at the store or online!!

People want to purchase a movie/music/book they like, w/o useless DRM, w/o the damn FBI warning screen (which only appears on legal copies anyway - WTF?!), and without man made restrictions designed to force them to pay for multiple copies of the same piece of work! They want to be able to enjoy the content on their TV, PC, AND mobile device without having Homeland Security, ICE, the FBI, Roscoe P Coletrane or Barney Fife knocking down the door because they are violating some ridiculous statute that the gatekeepers hold up like a golden chalice on top of the mountain when they cry about how the pirates have robbed them blind, leaving them cold and wet in the street!

Cry me a river, build a bridge and get over it!

Offer products people will pay for, allow them to use them as they wish and you too can enjoy the fruits of your labor on payday. If not, fill out your unemployment paperwork and quit bothering me - I'm trying to listen to my new FREE Nine Inch Nails album before I sit down to watch a couple of FREE movies without commercials or FBI Shield screens!

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it is like running a starbucks, where 99 people get free lattes, and the 100th has to pay $500 for it. It works as long as you have idiots willing to pay $500 for a latte. Perhaps they make it exclusive and rare by writing his name in marker on the site of the cup or something.

It works as long as you have idiots willing to pay $500 for a latte.

It works as long as you have idiots willing to pay $20 for a CD

It works as long as you have idiots willing to pay $60 for a video game

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Strawman.
Bullshit! Strike one!

Most albums are priced at half that.
Bullshit! Strike two!
Citation requested - please make sure these are prices on new albums also - I have no doubt I can find music from the '60's thru the '90's at less than $10/album. You're talking out your ass here and we can all see that without waiting for a Wikileaks transmission.

Seems more than fair considering albums were 6 bucks in the 70s, 30+ years ago.

Bullshit! Strike three!you're out! I still have several albums both on cassette and vinyl with price tags from local stores that are far higher than the $6 you claim. $8 to $10 was very common and is 33% to 67% higher than you suggest.
No the current prices do not "seem fair" - it would seem fair if the prices of albums were considerably less than they were in the 1980's when many of us updated our collections to the "new, low cost" CD format that was going to make music affordable again. That movement never got off the ground.

Here's a paper towel for you - please wipe your face off when you pull your head out of your ass and just slowly back away from the keyboard.

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Actually what I'm saying is that the music industry went to a lower cost format with CDs vs. cassettes. However, album prices didn't go down with the lower overhead cost - they went up.

Not sure what the point of your link was since I saw exactly two albums on that first page that were $5.99:

The Gift by Susan Boyle was $5.99 on CD and $11.99 for the MP3 download!! One of those items actually has a materials cost for each copy created - the other one is a single file that will be copied thousands of times at least. So why does the single file command a higher price when it is obvious that the MP3 costs far less to "manufacture" and requires virtually no overhead in terms of shipping or raw materials?

The second album was O Holy Night (DVD/CD) by Jackie Evancho. I don't know Jackie nor have I ever even heard of her but she has a seasonal holiday album out and as seasonal items go this one has been marked down from $8.98 to $5.99 probably because the holiday season is coming to an end.

Those are the two out of twelve that are $6 and to be honest I wouldn't pay for either of these albums even if they were only 99 cents. I certainly wouldn't even take the time to download them for free - which I'm sure they could be found somewhere at that price.

The interesting part of that list is the other 10 albums:
1. Glee: The Music, The Christmas Album by Glee Cast
2. Sigh No More by Mumford & Sons
These two are marked down and cost less than $10 - reasonable in my book for an album price these days. The second one is even by an artist whose music I would actually buy!

However, the rest of the top twelve:
3. Speak Now by Taylor Swift $18.98 now $12.99
4. Glee: The Music, Volume 4 by Glee Cast $13.98 now $11.88
5. Illuminations by Josh Groban $18.98 now $12.99
6. MICHAEL by Michael Jackson $13.98 now $11.88
7. The Union by Elton John and Leon Russell $18.98 now $13.82
8. Live At The Troubadour (CD +DVD) by Carole King and James Taylor $19.98 now $12.49

Those albums run anywhere from $14 to $19 before the discount. Those highly inflated prices are incredibly ridiculous, as a consumer, I choose NOT to pay for them because they are not affordable. Apparently I am not alone, since all of these albums were discounted - most likely to increase sales.

9. Farmer's Daughter by Crystal Bowersox $11.99
Still a little higher than what I personally think is reasonable but this album makes the bestseller list without a discounted price - kudos to Crystal!

10. The Promise: The Darkness On The Edge Of Town Story (3 CD/3 DVD) by Bruce Springsteen $119.98!!
Wait...it's marked down to $97.01!!

Are you effing kidding me?? $100 for 3 plastic discs??
What was your point again?

Re: Re:

"Name me one streaming service that is better than piracy. I'm a netflix subscriber and have bought things from iTunes."

It depends on where you're located (I assume the US from your comments?), but I've been very happy in Europe with Spotify, coming your way soon.

Granted, I've only been with them for a few weeks, but I've found very little not available so far, can save playlists to my iPhone to listen to offline, and all for Ä10/month. I'm sure there's a downside, but it's not raised its head to me yet. Saves me being raped on iTunes at least, and I'm not allowed to use most of their competitors.

Nice to get some sort of a break here for once. Now, if only Netflix would get their fingers out and start a European service, I might started "renting" movies again as well...

Re:

I just want to say, like it or not, piracy is here and it is not going to go away. Arguing that its immoral is clearly not going to reach the ears of the "pirates"

There are tons of reasons why pirates, pirate. Probably the biggest one is economic, they dont have the money to cure there bordem but they dont need the money, just get on and download. Again, you can argue until your blue in the face about how right or wrong it is, but it doesn't and wont change the reality.

Another reason is just plain civil disobedience, some just are pissed off at the economic situation that these company's are exploiting; It may just be a matter of principle.

Fact is, the industry needs to deal with piracy and they are going the wrong way about it, arguing its immoral just doesn't go anywhere, setting up DRM that does nothing but piss the legitimate users also works against the cause.

To wrap it all up, get off your high horse, your not better then anyone else; bring something constructive to the table or shut up.

Re:

it is like running a starbucks, where 99 people get free lattes, and the 100th has to pay $500 for it..

No it isn't. Each time you sell a latte you have a fixed marginal cost to bear - so the more people take stuff for free the bigger your loss. When people copy your stuff they bear the costs of copying themselves - the situation is completely different.

It's more like a chef who spends significant money developing recipes and then makes them available for free on its website (free music downloads) - but also sells food at high prices in his restaurant.

He doesn't care how many people make his recipes at home - because that doesn't cost him anything and he will probably find that the more people do that the more will also go out for a meal.

Re:

Yeah except I can't download a latte... they can fight piracy on an ongoing basis from now until the internet dies, or they can try to make money in a drastically changed market. I don't see how the options keep escaping them.

Re:

Your analogy is flawed. The 99 lattes cost starbucks money, where downloadable content costs nothing to the distributor. If you put the content online for download, you lose nothing by having 99 people get it for free and gain everything by creating die hard fans from your works who DO WANT limited edition items.

Re:

Bit of an unrealistic example don't you think, that's a mean of $5 or a median payment of $0. Although if we are talking ebooks, or music its like a coffee shop where 99 people get virtual lattes, looks, tastes, and smells like a latte, but has no physical reality, probably a great way to diet. Then we've got the hundredth sucker that gets a real latte made out of the most expensive real ingredients hand carted in from shangri-la, complete with gold encrusted sprinkles, fireworks and a crystal commemorative cup complete with his/her name and date of purchase. Oh and to make it more accurate lets say that you only had to make the virtual latte once, and now you have some idiot vending machine that just hands it out whenever someone asks so there is no actual labor physical, mental or otherwise involved in them, which means that your cost per virtual latte is basically $0 over time regardless of how much it took you to create it initially. Its a case of (Initial cost of virtual latte + marginal cost of virtual latte * 99 people)/99 which since your marginal cost is 0 would be (Initial cost of virtual latte)/99 and that's if you only sold 99 of them, hopefully as a soon to be latte baron you would sell significantly more of them. Its still kind of a failed metaphor since last I looked reading a book or listening to music didn't cause the book to disintegrate into almost unusable crud. Actually if I liked lattes 500 might not be unreasonable that concoction. How much does it cost to hand cart stuff from shangri-la?

Re:

You call it debunked, but it still isn't. point to the 1 in 100 or 1 in 1000 who is willing to overpay doesn't explain away the other 99 (or 999) who didn't want to pay a cent, but still enjoyed the product anyway.

The net effect is that people buy books they wouldn't have bought otherwise, and the author makes money he wouldn't have made otherwise. So what's your problem?

It should be noted that theoretically, a band could refuse an advance, and simply start taking royalties from the moment they sold album one. I know a formerly independent label band that did that when they jumped to Sire.

But most bands relish the idea of signing with a label and getting an advance; it gives them a living wage while they write music, and a recording budget that is ample; much better than when they had to fund it out of their own pocket. They also get to avail themselves to the label's promotional department, who take over much of the time consuming chores the band previously had to do themselves.

Signing to a record label is something just about every band dreams of doing.

"It should be noted that theoretically, a band could refuse an advance, and simply start taking royalties from the moment they sold album one. I know a formerly independent label band that did that when they jumped to Sire."

That is rare as hell and you know it. The vast majority of labels will only take on a band that allows them to dictate who will engineer their albums, who will mix them, who will 'produce' them, and who will master them. The people the label will want the band to use will cost way too much for the band to employ without that big advance.

Re: this is what happens when you decimate the middle class

It seems pretty simple to me. If you don't think something is worth what is being asked, don't buy it. Usually, you don't need it anyway. I keep reading that if people keep pirating, no one will be able to make a money for their work. Isn't that kind of the free market rule? If people don't value what you produce, you should stop producing it. I haven't bought or downloaded a single movie or song in the past two years. I don't see the value matching the price, so I don't buy or use.
It seems that the inflated prices come from the writers/performers/developers got the idea of "get rich quick". They want to get to mega-star status and not have to anything worthwhile afterward. I follow the "Come up with a good idea from time to time and work your arse off" rule. I don't have millions from it, but do make a decent living doing what I do well.

How does this debunk anything?

These are people who wanted more than just the music tracks or text of a book. So they paid for it.

I'm not sure how this demonstrates that people don't merely want stuff for free. There are a whole bunch of people who don't care about the extras and merely want the tracks/text for free. Showing a few people who step up to buy some extras doesn't "debunk" this at all.

However, on a slightly different track, I do agree that this demonstrates one way of providing incentive to get consumers to open their wallets.

Re: How does this debunk anything?

Debunking "people just want stuff for free" is the wrong way to think about it. It makes it sound more cavalier then what the industry is intending. It sounds like free sample day at the grocery store, people get free stuff then they go buy more.

What they mean to say is that people only want free stuff, as if they won't ever buy if there's a free option. That's been debunked.

Re: Re: How does this debunk anything?

You hit something there. Piracy turns the free sample day into the the "free everything" day. People aren't content with the samples, they just take the whole package. Remember, online, nobody is watching them. If they think they can get away with it, they will.

This isn't free samples anymore, it's just a free for all.

What they mean to say is that people only want free stuff, as if they won't ever buy if there's a free option. That's been debunked.

Yes, it's back to that 1 in X person who will overpay. Maybe they don't realize they can get it for free. Maybe the have some moral issue. Maybe they just want the shiny disk or the hardcover book. But those people are becoming more and more rare, to the point where they have to pay significantly over the true market price to make it work out. As that number continues to shrink, the market goes away, and there is no longer any money to be made doing X. People still want X (book movie music, whatever) but they are no longer willing to pay.

Far from debunking the myth, this post has entirely confirmed it. Just the TD isn't exactly wanting to see it.

Re: Re: Re: How does this debunk anything?

Re: Re: Re: Re: How does this debunk anything?

record labels are **NOT** going to create content 'just for collectors'.

The market for collectors would be far too small to sustain the record industry, and the fact the the record industry, will look at possible future sales, and correctly decide it is not worth producting that content in the first place.

No content created, means you have nothing to file share, steal and give to you're friends and enemies.

You can do it, physically, but you are cutting your own throat by doing it, and you are cutting everyone elses throat as well.. even the honest ones.

Mike I know you do not like the TSA and their new rules, but those rules, and the things they are required to do is because a small group of people screwed it up for everyone else.

So action has to be taken to stop those small groups, but the result is hurt and damage to everyone..

same thing with file sharing, illegal file sharing..

You force the authorities to crack down, to take action, to develop DRM technologies, and so on.

If it was not for a small group, (or a large group) doing the WRONG thing, we would not have to put up with what we do today...

Re: Re: Re: Re: Re: How does this debunk anything?

If they're not making money selling physical products, stop selling physical products. But they are making money.

If they're not making money selling non-physical products, like say mp3s in iTunes, stop selling non-physical products. But they are making money.

At the very heart of it, music production labels are about promoting the artists in the hopes of making money back from their art. If they cannot figure out how to make a profit in a changing market, they need to fail and let those who can take up the reins. That, my friend, is the very essence of capitalism.

Re: Re: Re: Re: Re: How does this debunk anything?

The market for collectors would be far too small to sustain the record industry, and the fact the the record industry, will look at possible future sales, and correctly decide it is not worth producting that content in the first place.

The buggy whip market got much smaller when cars became more mainstream, and, yes, many whip makers went out of business. However, you can still buy them today to, you guessed it, collectors.

No content created, means you have nothing to file share, steal and give to you're friends and enemies.

Yes, because there was no art created before the members of the RIAA, and certainly never before copyrights, right? All music ever created happened in the last handful of decades. Good to know.

You force the authorities to crack down, to take action, to develop DRM technologies, and so on.

Absolutely not. The record labels could have seen that Napster was the future of music sales and jumped on board then. They could have reacted to the changing market. They could have realized that printing large amounts of shiny discs was no longer going to be a sound business model. They chose to ignore, and then attack, the changing market. They forced us to pirate because they would not meet market demands.

Thanks for that TD and you're ilk.(sic)(maybe?)

So, now the weight of all piracy lays upon TechDirt's shoulders? Be straight with me, Darryl, you're a politician in Australia, aren't you?

Re: Re: Re: Re: Re: Re:

You handled that better than me. This guy, or an army of people like him, seem to post nearly identical angry rants on every forum on the web. "You libs blah-blah, socialism yada yada wharrgarrrblll..."

I think there's a very deep core of abject terror behind it. Fear that their whole world will crumble if everything isn't done the way it always has been.

Re: Re: Re: Re: Re: How does this debunk anything?

The market for collectors would be far too small to sustain the record industry... No content created, means you have nothing to file share, steal and give to you're friends and enemies.

Wrong. Record companies don't create content, musicians do. Most musicians make zero money from record sales directly. Records give musicians exposure, which for a tiny minority leads to high-paying gigs at large venues, but for the vast majority of musicians the recording industry might as well not exist. If they're smart they can get the same exposure by releasing their songs online so people can listen to them just like on the radio, and without signing away the recording rights.

Re: Re: Re: Re: Re: How does this debunk anything?

The market for collectors would be far too small to sustain the record industry, and the fact the the record industry, will look at possible future sales, and correctly decide it is not worth producting that content in the first place.

Ah so what you're saying is that while there is money in fans there isn't enough to feed the bloated fat records labels sponging off the artists and so they (the artists) should just do it themselves and keep all the money? You might even be right there.

Mike I know you do not like the TSA and their new rules,

When did the TSA come into this????

because a small group of people screwed it up for everyone else.

I assume by this you mean the US congress, senate and presidency? Or did you mean terrorists who, by and large, haven't done anything massively different to what happened all over the world for the last 50 years or so? Only the former seems to encompass the massively pointless and overreaching lunacy happening.

same thing with file sharing, illegal file sharing.

Ah so copying a file is the same as blowing things up? Thanks for clearing that up.. I shall take a bomb disposal course before I get amy more music just to be safe. Can you clarify; is it also the same as interfering with children, killing kittens and blugeoning baby Jesus with a seal?

If it was not for a small group, (or a large group) doing the WRONG thing, we would not have to put up with what we do today...

Yeah...

People will always get something for free if its easy to get for free and of decent quality. The same as if someone is offering a quality product at a reasonable price then people will purchase it. Many times anymore the free choices are better than the unreasonably priced product (ex. Google Docs vs. Microsoft Office)

Questions about rtb+cwf

You state that the "more expensive packages outsold the cheaper ones".

Did you even sell any of the cheapest packages?

I find it hard to believe that anyone actually purchased just an insider badge or just a crystal ball. The badge and ball are only on the list with prices so that they can be included in higher priced packages and add perceived value. Its kind of bogus to say that "more expensive packages outsold the cheaper ones" when the cheaper ones are worthless by themselves.

Looks to me like this post says that super-fans are willing to pay extra (lots extra) for limited edition stuff. How does that debunk the concept that non-super-fans just want stuff for free?

Re: Re: Re: Questions about rtb+cwf

Re: Questions about rtb+cwf

I just bought a badge+ball. I didn't have a lot of spare cash at the time, and a lot of the better t-shirts were sold out anyway, but I really enjoy the crystal ball and it was absolutely worth the few bucks I spent.

In the future, when there are more rounds of RtB offerings, I may go for one of the bigger packages - or I might lowball and just renew my crystal ball. Depends.

I love free stuff. There's also lots of things I'm more than happy to pay for. Sometimes the decision is as simple as my mood, or the thickness of my wallet that week - other times it has to do with the quality of the product in question. But I don't "just want stuff for free"

For example, I watch most of my TV through unauthorized streams, because the quality of the product and service is WAY better than anything authorized (especially here in Canada) - however, the service still has problems. If someone came along with a reasonably priced alternative that solves those problems, I would jump all over it. I was pretty excited when Netflix streaming came here, but of course the selection is terrible and I'm not about to pay more for a worse product.

So no, I don't just want things for free - I want the products that I know to be possible and reasonable in this awesome modern era full of great new media distribution channels. Since nobody is offering me those products at a price (except for massively crippled versions of them), but they are widely available for free from thousands of sources, I go with the free option. But what I want is a quality product, not just to "get stuff for free"

Re: Re: Questions about rtb+cwf

You left out the part about how you really like techdirt and want to support it with your dollars. You fall into the fan or even into the super-fan category.

I'm curious about techdirt but not necessarily a fan, definitely not a super-fan. If I could get the crystal ball for free I might check it out - but there is no way in hell I would pay for it.

The Reznor example is the same, those that are curious won't pay. The fans and super-fans that care will pay. Reznor realizes this and offers a free option, this is a way to turn some of the curious into fans. Its clear that some people just want stuff for free or are at least not willing to pay for it.

Re: Re: Re: Questions about rtb+cwf

Wait, what?

So your point is that fans will pay, but non-fans won't? Well d'uh. And your continuing point is that by offering stuff for free, you can reach the curious non-fans and potentially turn some of them into fans who then will pay, as opposed to them never seeing/hearing/etc your work at all?

Re: Re: Re: Re: Re: Questions about rtb+cwf

I don't think this post is trying to claim that there's nobody out there who wants stuff for free. It's about the "people just want stuff for free" mentality that so many people have - those who, when presented with a list of the many problems with copyright or the many ways to include free in a business model, simply ignore it and stubbornly insist that "people just want stuff for free"

While it is no doubt true that there are pathological freeloaders out there, stories like the one in this post demonstrate that there is actually a huge sliding scale of attitudes towards buying media, and a huge number of reasons why those don't pay choose not to do so. Thus it's probably a good idea to pay attention to all those trends and not be dismissive of the concept of "free", especially when some people seem to be doing so well by embracing it.

Re: Re: Re: Re: Re: Re: Questions about rtb+cwf

"Sliding scale"...that's the perfect term because it invokes a mental image that just may penetrate some minds that only see one way of doing things. Their scales are stuck at one point, rusted in by flopsweat brought on by change.

Re: Re: Re: Re: Re: Re: Questions about rtb+cwf

Other than water, air and our actual basic necessities, there is not much that applies to *all* people. So, I'm sure I understand your point. The title of the post does not include the word "all". See what you did there? You left out "all" where you meant to insert it.

Re: Re: Re: Re: Re: Re: Questions about rtb+cwf

Other than water, air and our actual basic necessities, there is not much that applies to *all* people. So, I'm sure I understand your point. The title of the post does not include the word "all". See what you did there? You left out "all" where you meant to insert it.

Re: Questions about rtb+cwf

Yeah, actually, we sold a lot of them (and continue to sell them to this day).

I find it hard to believe that anyone actually purchased just an insider badge or just a crystal ball.

Well, don't know what to say other than your wrong. Of course, given your history on this site, and the fact that you waste no opportunity to slam anything I write, I'm not surprised that *you* don't value it. But lots of people who actually like what we have to say felt it was worth it.

the cheaper ones are worthless by themselves.

Heh. I love it when people who don't like something someone else does declares it worthless. I can assure you that lots of people did not find it worthless at all.

Looks to me like this post says that super-fans are willing to pay extra (lots extra) for limited edition stuff. How does that debunk the concept that non-super-fans just want stuff for free?

The point is to offer a variety of packages at whatever level of fandom people wish to support. If you've actually connected with those fans, and given them a scarce reason to buy, many, many will. Will there be *some* people who don't pay? Of course, but how is that any different than today?

Re: Re: Re: Questions about rtb+cwf

"Anonymous Coward" is your option in the Name field when posting a comment. Nowhere does it claim that your comment will not be identifiable in any way.

Besides, the commenter is remaining anonymous. It's not like Mike knows who they are, or has any way of identifying them. But if someone posts all their comments from the same IP address then yes, it is possible to see that they came from the same source.

Moreover, as you should be able to see, this site recently enabled the auto-generated avatars, which as far as I can tell are attaching themselves to IPs so that everybody can differentiate between ACs while still allowing those people to remain anonymous.

Re: Re: Re: Re: Re: Questions about rtb+cwf

Even though I don't think this has anything to do with "getting info about people", I'll provide a more detailed answer to your question:

I don't think people have any reasonable right to privacy when it comes to their IP address. I think they do have a right to privacy of the identity attached to that IP address, and I hate it when you hear stories about service providers happily handing over identifying information when presented with a list of IPs without a warrant.

But the IP address itself is public. Though it does provide some vague identifying information (like IPs that come from within recognized ranges like government facilities or large companies), even that is easily obfuscated with a proxy server. Moreover, since the way the internet works requires IP addresses to be known to both sides, it would be ludicrous to consider them private. Requesting data from a server but demanding it not read your IP is akin to requesting correspondence from a company but demanding it not read your address.

Re: Re: Re: Re: Re: Re: Questions about rtb+cwf

For the record, I do not care if Mike tracks my every post from every connection that I might use (think different snowflakes). I don't care if he ties it all together. I just don't want to be bothered with registering and logging in.

Re: Re: Re: Re: Re: Questions about rtb+cwf

There is no real anonymity on the Internet and there likely never will be. The best you can hope for is for those with the ability to see your identifying data not to abuse or share it.

Mike, for instance, could make a fairly safe guess that two AC posts from the same IP, with the same user-agent, belonged to the same person. That's use but it's hardly abuse. He can't tell much beyond that and I'm not sure how he even could abuse it aside from outing AC posts that come from the same IP as a registered user.

Re: Re: Re: Re: Re: Re: Questions about rtb+cwf

"There is no real anonymity on the Internet and there likely never will be."

Actually, with the domain seizures people are working on all sorts of anonymous and distributed systems for communication and locating resources. The NSA, MI5, MI6, and several other agencies keep warning about how this war on infringement is going to lead to an encrypted, untraceable, and un-monitorable internet. It is the main reason that several US federal agencies are pushing for a backdoor into encryption systems.

Re: Re: Re: Questions about rtb+cwf

He is. I don't know who he is. You don't know who he is. He remains anonymous.

Have you, Mr. First Amendment and Privacy Rights guy, been snooping on anonymous poster's IP data?

First of all, no, I have not. I did it based on the image next to his name, just as anyone on the site could. It's the same way that I recognize you from your previous comments. Though, in your case, it's easy to identify you from your tone. You seem to post from a variety of different machines since your avatar changes, but I -- and most others here -- can easily associate your comments with previous comments from the way you write and the consistently debunked things you repeat.

Second, what does First Amendment or Privacy Rights have to do with any of that?

You're building a strawman because you don't like being proven wrong. Sad.

Re: Re: Questions about rtb+cwf

Re: Re: Questions about rtb+cwf

"Will there be *some* people who don't pay? Of course, but how is that any different than today?"

So, how does you article debunk that people just want stuff free when you just said that those people exist? And, what does today have to do with anything? Not sure how to answer your question as it does not make sense. If there is a decent free option, many, many will take it.

Re: Re: Questions about rtb+cwf

"Of course, given your history on this site, and the fact that you waste no opportunity to slam anything I write, I'm not surprised that *you* don't value it."

Am I notorious?

Much like mp3 files, insider badges and crystal balls are infinitely reproducible. Your cost to produce say a trillion of them is the same as your cost to produce one. The scarcity is that you have a monopoly on insider badges and crystal balls. What you have done is use your monopoly power to extract a high price for an infinite good. But hey, good for you if you can get people to pay for virtual goods - sounds like good business to me.

let me explain myself badly

Most of the folks that are trying out these new business models and having success with them are not the old corporate behemoths. They are usually driven by the content creators themselves or groups of them or inventors or ... you get where I'm going. They are offered up by the folks that I want to support.

I don't want to buy a CD for ... how much are CDs these days? ... $25 and have a dime go to the musician or group and $24.90 go to the fat cats. I'm sorry. I don't want to finance you. Suck it up.

I have no problems, however, supporting, even by way of $, those folks that actually did something besides sit in a corporate meeting and decide that lobster was on the menu for lunch.

I lot of these arguments seem focused on which group of people is larger, the group who just want something for free or the group who will pay for a quality product even if they can get it for free (cheapskates vs. generous). I think that's the wrong perspective.

The right question is: are there enough people willing to pay for a free product (generous) to make that a viable business model? More importantly is that model viable enough to suggest that more companies should be moving away from high-cost products riddled with DRM and legal notices?
In my opinion, the answer is yes.

Quality plays a major role in piracy as well. After you've been burned paying for a product only to find out it was low-quality or not advertised, you get to the point where you won't pay for anything until you've tried it. This a major issue with games and other software, and the support and return policies make it worse. Since more and more companies have stopped putting out demos (or putting them out late), the only way to try the product is to download it. And once you've got it it becomes easier to rationalize not paying for it.

In my experience, companies that put out a quality product, support it, don't overcharge for it, and generally adopt the attitude of gratitude/partnership with their customers have fewer issues with piracy. That's not to say there are far fewer people pirating their products, just that they build a reputation with their customers and will benefit from that reputation. In actuality, some that would have pirated a product will pay just to support the company.

There are some companies that I have purchased products from in the past that I will never buy from again due to the quality of their product (relative to cost) or the actions they have taken to stop piracy (DRM that causes problems for legitimate users). On the other hand, there are companies that I will purchase products from without a second thought (or even trying them first) because they have demonstrated a willingness to provide quality products and service. Even if the original product was buggy, their response and attitude will make me a loyal customer.

I remember when I purchased the first Two Worlds game. Not the greatest game, though it was fun. But while most companies threaten you with no support if you don't register your game, this company (Reality Pump/TopWare Interactive) took a different approach, which they did not advertise up front. After I registered, I received an email with an additional serial number for the game for a friend. Because I registered my game, I could give a friend a free copy of the game!

Another example is the RPG Eclipse Phase created by Posthuman Studios. If you haven't heard about them, just poke around a bit. I will do whatever I can to support this group, and I'm not alone.

Bottom line: Focusing on treating your customers with respect and gratitude (instead of on people who arenít going to pay for your products no matter what) can make you a lot of money. Even if you give away your products for free. Attitude, support, quality and value make for a far better business model than restrictions, DRM, legal action and greed.

Re:

I totally agree with most of what you say - and I love that part about Eclipse Phase (what a cool idea!)

However I don't think we should be focusing on "generosity" but more on simple fandom. A premium edition of a book is not the same as a free e-book or a cheap paperback - it actually is a better product. It's just not a better product that everyone wants. When huge fans buy the premium copies, they aren't being generous, they are being fans!

Similarly, customer service is requires peoples' time and that makes it scarce - not infinite like the software itself. Buying software to get access to the support isn't being generous, it's making an investment in something beyond the software.

You are absolutely right that treating customers well is probably the most important thing a company can do, especially ones that deal in easily copied digital goods. But it isn't about convincing them to be generous - it's about offering them something they consider worth paying for.

On another note...

Plenty of people make money off of making Open Source software. Sometimes it's a patronage/sponsership model, sometimes it is an additional services model, sometimes it is a donations model.

Back on topic, some of the commenters on this thread do not understand the collector's market. Shortpacked has a number of comics(and blog posts) with commentary about the collector's market and how it works.

Re: On another note...

Collectors markets work to some extent, but they are very discretionary, and get back to the same issue as always: Finding a very small number of people to pay significantly higher prices for something, so that others can have the core of the product for free.

Selling collectible comics, example, is nice. But if everyone else gets them for free, the at some point the collectors may not get any true value.

Also, and this is key: not everything is really collectible, most certainly not in a short to medium term. It might appeal to you in some way, but it might not actually be truly collectible. If everyone who buys the collectible whatever keeps it in reasonable condition (because we are all aware of the value of collectibles), you could end up 50 years from now with something that is worthless, or worth no more than it was new.

The fewer people willing to pay for something, the less likely it is to be collectible anyway. Rareness by itself is not a very good indication of value, it is demand. 500 "collectible" signed books might sound like a small number, but if there are only 450 people who really want them (at the given price) they aren't any more collectible than firewood, and are unlikely to resell for even the purchase price for years.

Simple put, collectibles are speculative in nature, and if everything becomes some sort of collectible, the market overall suffers greatly from a glut of supply. At that point, you can use your $250 autographed book as a weight to keep all those band shirts from falling off the chair.

To Darryl and the other AC's who are somehow unable to accept that people will pay when they don't have to, I have over half a million people who would disagree with you. As a longtime player of Guild Wars, I can tell you that its business model is a bit unusual for an MMO in that there is no monthly fee - aside from the initial purchase of the game, much of their revenue comes from the shop where you can buy optional extras.

And I will make it clear again, those things in the cash shop, all of them - extra character slots, name and appearance changes, skill unlock packs, etc. - are all completely optional. They have no effect on gameplay whatsoever, and a player could finish the entire game without ever buying a single thing from the shop.

Yet most players buy at least one thing from there, and many players get lots of stuff (players love having lots of characters, for instance, or getting the latest costume packs for the festivals and such). So there you have direct evidence of people more than willing to pay when they don't have to, when they could, in effect, play the rest of the game free of any additional cost. Yet so many don't, and the game has done well enough with this business model that Guild Wars 2 is looming close on the horizon, which will use the same business model as the first.

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As I said before, some people will. But over time, fewer and fewer people pay, and as a result, those that do pay have to pay more and more to keep things on an even keel. As that price goes up, remarkably, fewer people are interested in paying.

As for guild wars, what they are selling are things that the people value, because of social pressure to do so. Remove the interactive nature of the game, or any visible social implication of the extras, and nobody would touch them.

If they could play the game for free, and there was no social implications to the add ons, few if any would buy them. If one person could buy it and give it to an unlimited number of people, few people would buy it, they would just ask around until someone gave it to them.

It isn't difficult to understand, but it is very different dynamic from selling music, but it comes down to the same thing.

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"But over time, fewer and fewer people pay"

Only if you fail to keep their interest in your product.

"those that do pay have to pay more and more to keep things on an even keel"

Why? If they're digital goods, where's the marginal cost to distribute them after creation? If you're selling physical goods, aren't you subject to the same market forces that affect everybody else (again, you have to sell what people want)?

"what they are selling are things that the people value"

Yeah, that's kind of the whole argument. Rather that trying to sell things people don't want (copies of MP3s, for example), concentrate on selling things people do want (gig tickets, merchandise, limited edition vinyl, songwriting, etc).

Guild Wars has one way of doing this, WoW has another, other MMOs have other ways still. There's not one single right way to do business, but trying to sell the things your customers don't value or don't want is a sure way to failure - hence the recording industry's problems.

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I trust you will send out a memo to all the writers out there that writing is no longer a money making business, and that writing is no longer how they make a living. They need to learn how to do all sorts of things other than writing in order to make a living now, because you have just declared their business dead.

NICE!

If they're digital goods, where's the marginal cost to distribute them after creation? If you're selling physical goods, aren't you subject to the same market forces that affect everybody else (again, you have to sell what people want)?

There are a couple of things here. Marginal costs are not the only costs involved in producing a work (because the work didn't produce itself). It is only an indication of the costs of producing one more copy. It doesn't reflect the costs of making the original from which the copy is made.

The other thing is that physical products which can be made digital will suffer the same fate as music has. When a consumer is put in the position to select "physical product, $10" or "pirate it for your e-reader for free", some will choose the latter instead of the former. Over time, they may tell their friends about it, provide links, etc. More and more people choose the latter delivery method instead of the former, and the writer is left with precious few physical sales.

In order to make a living on those remaining sales, he needs to raise the price of the book, in order to make back the money he lost to piracy. Since he cannot just randomly raise the price, he starts autographing books and creating "collectors editions". This is all fine to start with, because yes, people like to collect things. But just like the old band t-shirt problem, there is a limit to the number of collectible items most people will purchase.

See, collectibles right now is still a good market because we are looking at 100 year old plus things and seeing them increase in value. However, much of that increase is because the things are truly rare, and have become rare in a natural process. Nobody knew that first generation video games (or Apple computers) would be incredibly valuable. If they did, everyone would have kept them locked up in boxes and never used them, waiting for the market to come to them. The problem? If all of the Apple 1 computers were all still around, because we had all taken good care of out "collectible" items, the market just wouldn't be there.

At a point, the market will flex, and the flood of "collectible" and "limited edition" products will no longer be considered significant at all. People will go 20 years from now trying to sell a TD t-shirt, and the marketplace will yawn. There will be 500,000 t-shirts from other, no longer relevant websites for sale at the same auction, and they will all be worth about the same: their weight in cotton.

Piracy backs people into corners. The business models being pushed here on TD as "great ideas" or "how things might work in the future" are mostly dead ends, functional once, twice, maybe three times, but the public will see through them and understand that they still don't have to pay for the product they really want. At that point, they stop doing the stupid thing they were getting tricked into (like buying the limited edition crap), and instead go back to the product they really wanted, which is now free (thanks to piracy!).

Each new trick to get people to spend money becomes less and less successful. You are left with a few idiots, paying way over market value, supporting the rest of the freeloaders.

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"I trust you will send out a memo to all the writers out there that writing is no longer a money making business, and that writing is no longer how they make a living"

If the writers you know have the same level of reading comprehension as you, gladly. They can't be very good if their literacy skills are as poor as yours.

"Marginal costs are not the only costs involved in producing a work (because the work didn't produce itself)."

...but they're the only costs after the work has been created. If the initial costs are too high, and customers find the prices too high, they may need to find ways to a) sell more copies or b) reduce their initial costs.

"The other thing is that physical products which can be made digital will suffer the same fate as music has."

Your argument here makes no sense, especially in light of the argument I made above. Repeat after me: you sell the (preferably) finite good that people want to buy. If nobody wants to buy the $10 physical product, you either have no fan base or you're selling the wrong thing - nothing to do with "piracy".

"If all of the Apple 1 computers were all still around, because we had all taken good care of out "collectible" items, the market just wouldn't be there."

...and what exactly would that have to do with Apple? Primary vs. secondary markets, look 'em up.

"the flood of "collectible" and "limited edition" products will no longer be considered significant at all"

Yeah, just like there's no market right now for collectors' items and antiques because there's so many of them (what?). If your collector's item isn't selling, you may have invested in something that other people don't want - that's what I'm getting at: sell the things people actually want. It's your problem if that's not the same thing you want to sell.

Also, again, why do you concentrate on the secondary market? Surely, even if these items are selling like hot cakes, the original creator has already made his profit? Whether there's a secondary market, many years down the line, for a product has nothing to do with the original creator's cut.

"There will be 500,000 t-shirts from other, no longer relevant websites for sale at the same auction"

Which means nothing in this context, as Mike will already have made his money from the initial sale and will hopefully have transitioned into other goods that people want to buy in the present day.

Why do you morons always seem to assume that T-shirts are the only possible merchandise, anyway?

"At that point, they stop doing the stupid thing they were getting tricked into (like buying the limited edition crap), and instead go back to the product they really wanted, which is now free (thanks to piracy!)."

Still ignoring the ongoing clarifications between "finite" and "infinite" goods, I see. You sell the ones that are either more difficult/impossible to pirate or offer something that an infinite good cannot (e.g. a physical limited edition book would fit both categories, as would custom, one-off work or artwork from the author themselves).

"When the idiots wake up, the game is over."

Yep, when those of you who are trying to return to an outdated and workable business model wake up it'll probably be too late to adapt to this century. Good riddance.

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Paul, your comments are always insightful. Wrong, but insightful.

Yes, marginal costs are the only costs after creation. But in the resale cost of an item is money to pay for the creation. You don't only pay for the marginal costs of bread (ingredients), part of the cost is to cover the machines to make the bread, the building those machines are in, etc. That is only an example. Marginal costs does not equal selling price.

You can make the argument to sell finite goods. But when that same good is available in digital form, what you are selling with the finite good is something that has some sort of value beyond the content itself. As people become more comfortable with their e-readers, in the same manner they become more comfortable with mp3 players, they will move away from the physical product. They will do so even more quickly if they can get the products for free (which is the point of the discussion). In selling the (artificially) scarce physical products, you are looking for the 1 in X person who isn't going to just take the free digital version.

As for primary and secondary markets, the point of collectibles for many people is that they are valuable. But if there is no secondary marketing, or if everyone who purchases the artificially rare thing up front still has it in equally good shape, there is no appreciation in the secondary market. No, it doesn't affect Apple (and I didn't suggest it did), but it does remove value from the concept of limit edition collectible whatevers, because too many people now are keeping things to try to make them artificially valuable.

just like there's no market right now for collectors' items and antiques because there's so many of them (what?). If your collector's item isn't selling, you may have invested in something that other people don't want - that's what I'm getting at: sell the things people actually want. It's your problem if that's not the same thing you want to sell.

There are so many errors, here, but let's address the key points. Rarity doesn't create value. Calling something "collectible" doesn't make it valuable. It is true demand in excess to the actual production and remaining examples of something that creates value (and therefore price). The old supply and demand thing. The problem is when everyone is generating things that are "collectible", the concept of collectibility itself is destroyed. Very little of what is deemed by it's makers as collectible today is really going to be worth anything. True collectibles are not manufactured as collecibles, they become that way because of public demand long after the product is made.

Stamping "collectible" on something doesn't make it so. Artificially attempting to make a market is just artificial, and will hasten people to move to the cheaper alternative (ie, piracy).

I concentrate on the secondary market because for collectors, that is the market that validates their choices. The secondary market is what tells them if they made a good purchase or a bad purchase. It will tell them if the TD t-shirt was a good buy, or just a silly way for the site owner to make money from the sheeple. Without a functional secondary marketplace, the primary market ceases to exist.

In simple terms, if you bought a house, and could only live in it for 10 years and resell it for 1 cent on the dollar, how many people would buy houses? Without the secondary market to complete the other end of the transaction, the first past rarely occurs.

It's the key point. Once people come to understand that there is no real secondary market for this stuff, that instead they are just buying something with little or no value beyond their own perception, many of them will no longer buy. The only ones left buying are the idiots who haven't caught on.

As soon as the last idiot stops buying, the game is over.

See, people don't want t-shirts, or autographs, or anything else like that. What they wanted was a good book to read, a song to listen to, or a movie to watch. That is what they value. The rest is artificial as plastic snow, and about as unique.

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"Paul, your comments are always insightful. Wrong, but insightful."

As much as I disagree with you, at least you seem to be honest and actually attempt discussion, unlike some others here. Funny how you'd call me "wrong" when I'm mostly offering opinion based on my own experiences, though.

"You don't only pay for the marginal costs of bread (ingredients)"

Look up the term marginal costs sometime, because everything else you mentioned is a fixed cost. You don't pay more for the building's rent if you produce 800 loaves one day instead of 600, so it's not marginal.

The same with digital goods - the bandwidth and electricity would be the marginal cost, the site development, server purchases, etc. would be fixed. So, the marginal cost is very small.

"what you are selling with the finite good is something that has some sort of value beyond the content itself."

Yes, which is what I was saying. It's silly to sell the infinite good with little to no perceived value, but the market for that good will be lower than the market for free, infinite goods. The trick is to leverage interest in the finite good into sales.

"As people become more comfortable with their e-readers, in the same manner they become more comfortable with mp3 players, they will move away from the physical product."

Hence the reason you need to offer something of value other than a collection of songs on a CD that gets ripped and left on a shelf, or a paperback that may only get read once then discarded. Not everybody will wish to pay, the trick is to sell to those who do. Even if that's a smaller number than before, you can make the same profits if you have imagination. Otherwise, you're just trying to sell something that has no intrinsic value other than as a transfer medium for the content, for which people are demonstrably willing to pay far less.

"In selling the (artificially) scarce physical products, you are looking for the 1 in X person who isn't going to just take the free digital version. "

Which is exactly the situation of the modern marketplace, whether you like it or not. The methods and products you try to sell are what reduce X to a profitable level, whereas trying to sell the same digital product raises it as high as possible.

"No, it doesn't affect Apple (and I didn't suggest it did)"

So, if it doesn't affect the original creator and doesn't affect the end user, who the hell cares? Why bring up Apple if neither they nor their customers are going to be affected in the decision to purchase?

"True collectibles are not manufactured as collecibles, they become that way because of public demand long after the product is made."

Great, so we agree despite your attempts to argue.

As I said, it's all about the value of the articles you're selling. Digital products, which have no resale value and can be infinitely copied at virtually no cost have little perceived value. A limited edition print run of 500 books, or a game that includes a "making of" book and vinyl soundtrack, or a DVD that includes a film cel have higher perceived value than a simple copy of the paperback, game or movie. For that, people are willing to pay, even if that's a much smaller market than you ideally want.

The secondary market does have a certain effect, but it's not everything. Even if the bottom falls out of a collector's market (see Beany Babies or comic books, for example), many people will still have bought the items *because they wanted them for themselves*, not because of an investment. 2K Games made significantly more money from me buying the Bioshock 2 special edition than they would have done from the game alone (which I'd probably have bought used at no profit to them), because they offered items I wanted, not because I'm hoping they'll make me a tidy profit. Some people bought the Beany Babies to play with, or limited edition comics because they preferred the cover art, not because they wanted high resale value in 20 years.

Get it?

" The secondary market is what tells them if they made a good purchase or a bad purchase. It will tell them if the TD t-shirt was a good buy, or just a silly way for the site owner to make money from the sheeple."

*sigh*

In your stupid analogy, Techdirt will have made the sale long before the secondary market fully develops. If there is a perception that T-shirts are a good investment, investors will buy them. People will also buy them if they think they look cool, or they get something else with it they want. If they're smart, before the secondary market moves on TD will have made their profit and be selling something else that's not offered by everybody else on the planet. If it moves on before that TD made a mistake selling T-shirts rather than something more desirable.

"In simple terms, if you bought a house, and could only live in it for 10 years and resell it for 1 cent on the dollar, how many people would buy houses?"

A horrible analogy, but people need to live somewhere and a thriving rental market would make those attractive purchases for certain people. It would be a different market, one that's less ideal to house builders perhaps, but it would still exist and run a profit.

People buy cars, even though they depreciate in value very quickly, because they still want their primary use. People buy limited edition CoD4 boxes because they want the night vision goggles, not because they want to see a profit. I feel sorry for you if you only see your entertainment options as being either totally disposable or a profit-making enterprise.

"As soon as the last idiot stops buying, the game is over."

Seeing your customers as idiots really is the first step to failing - you have no idea what they actually want and so offer to sell the wrong thing to them.

"See, people don't want t-shirts, or autographs, or anything else like that. "

I wonder why there's a long-standing secondary market for those items then? You seem to be confusing "some people" and "all people", which is probably the root of your misconceptions.

"What they wanted was a good book to read, a song to listen to, or a movie to watch."

Indeed. How you offer those to people is the key. Charging a premium for an overpriced, DRMed, regionally and device restricted digital file that's worth less than a physical product is not the way to offer it to them. I hope those industries finally get their heads out of their asses and actually offer attractive products to them on a large scale.

The solution is to service the smaller market for physical items and other scarce goods, and you're not going to sell to everyone. That's OK though, because you don't have to if you're smart about it.

It's the convenience, stupid

I play it on a Sonos, a sony phone, a PC and an very old MP3 player. And an MP3-capable CD player in a car (when I can be bothered to burn a disk)

I didn't have all these options before I could buy plain old MP3's easily. iTunes store was of no interest to me.

Could I buy all the albums I wanted by finding them for free somewhere ? Probably.
Could I be bothered ? No

Would said pirate site(s) offer me the convenience of the Amazon background downloader ? Probably not. Would I trust a piece of background software from a pirate site anyway ?
Would the site make sensible recommendations based on what I have anonymously downloaded before ? Hardly.

So if you're comparing the convenience of Amazon with the free content from god knows where, I'll happily pay £5 per album. And I think Amazon are doing very nicely thank you to prove that penty of people agree. Or maybe it's just that 90+% of the populace are not geeks who enjoy finding pirate sites and downloading torrents.

Of course, if Amazon offered a legal free and a paid option with no difference between them, I'd take free. Why not ?
But that's not the comparison.

Now, as many have mentioned here, the common scenario is that the "legal" option is actually a complete pain in the ass compared with an illegal free version somewhere.
That's just stupid, isn't it ?

Another point ...

Have you noticed that Macdonalds don't charge for the use of their seats. Oh my god, what if all the seats get taken up by people who are not actually buying food there ?

(And Macdonalds execs do say that they are basically in the real estate business, don't they ?)

I guess RedHat's business model must be useless, because Linux is free, right ?

or AVG.
or LogMeIn

Both of which I have at least 1 paid (and several free) subscriptions too.